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James Hyerczyk

The Euro is trading slightly lower on Tuesday, but inside yesterday’s range, suggesting investor indecision and impending volatility. I don’t think the single-currency is trying to form a support base at current price levels. Traders are just making adjustments following a quick three-day retreat.

Gains are likely being capped by the recent spike in U.S. Treasury yields and the rebound in the U.S. Dollar. Ultra-dovish policy from the Federal Reserve encouraged investors to seek a better return in higher-yielding assets like the Euro, but expectations for a wave of spending under an upcoming Joe Biden administration have pushed yields higher, with the 10-year yield reaching a 10-month high on Tuesday.

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At 14:07 GMT, the EUR/USD is trading 1.2138, down 0.0013 or -0.11%.

According to Reuters, not only have markets brought forward bets on Fed interest rate increases to 2023, many also reckon it could start withdrawing, or tapering, asset purchases earlier.


Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.2025 will change the main trend to down, while a move through 1.2349 will signal a resumption of the uptrend.

The minor range is 1.2025 to 1.2349. Its 50% level at 1.2187 is currently being straddled.

The short-term range is 1.1800 to 1.2349. Its 50% level at 1.2074 is the next potential downside target and the last potential support before a change in trend.


Daily Swing Chart Technical Forecast

The direction of the EUR/USD is likely to be determined by trader reaction to 1.2187.

Bearish Scenario

A sustained move under 1.2187 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into 1.2074.

Bullish Scenario

Overtaking and sustaining a rally over 1.2187 will signal the presence of buyers. This could trigger a short-term rally into a minor pivot at 1.2241. This is the last resistance before the 1.2349 main top.

For a look at all of today’s economic events, check out our economic calendar.
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